This is critical for Papa John’s, of course, given the sentiment setbacks following founder John Schnatter’s many exits and PR flareups. On a different note, he could start divesting more shares come August 19. Schnatter has already unloaded 3.8 million shares since early May, and now owns about 6.1 million. His stake in Papa John’s is down to 19 percent from roughly 31 percent.
Before getting deeper into this brand awareness push, it’s worth noting where the rest of the money is going. An additional $40 million is being diverted to royalty relief for North America franchisees across three areas: systemwide relief available to all operators to agree to some customary terms and to move on from the past events; incentive based royalty relief around guest-service targets; and, lastly, additional needs-based royalty relief for targeted franchisees.
Papa John’s termed the program internally, “We Win Together.”
Ritchie said nearly 100 percent of franchisees opted in, and Papa John’s estimates spending half of the $40 million between the remainder of fiscal 2019 and 2020.
A June filing revealed that Papa John’s is paying Shaq $4.125 million over three years to rep the brand, in three payments. The first of which will be for $1.25 million. It will then up to $1.375 million and $1.5 million in years two and three, respectively. Shaq is also receiving 87,136 shares of stock that vest between 2020–2022. At the time of the agreement, the shares were worth about $4.4 million or so, but, naturally, can change dramatically if Shaq helps gather investor sentiment behind the brand. He’s also an investor in nine Atlanta locations, including with hand-picked design elements (his signature is on the front of the building and his size 22 footprints at front door).
Papa John’s owns about 70 percent of the joint venture, and Shaq poured roughly $840,000 into the restaurants’ acquisitions costs of $2.8 million.
So, again, Shaq has some skin in the game with this ambassador arrangement.
“Given the excitement Shaquille has created among the Papa John's teams, we have no doubt that he will help drive positive sentiment among consumers as well,” Ritchie said. “We are very excited to get them off the bench and into a new national advertising campaign coming up this fall.”
There is another element to Papa John’s marketing rush, beyond just getting Shaq’s recognizable face in front of customers. The brand has been testing a number of value and menu constructs that combine its premium offerings alongside more accessible price points. It’s a traffic-driving initiative. Papa John’s hired former Subway SVP of marketing for North America, Karlin Linhardt, to its global CMO role in March.
Ritchie said Lindhardt, who also spent a decade at McDonald’s, worked to enhance Papa John’s testing methodologies. Currently, Papa John’s is evaluating several different accessible value setups in about a quarter of U.S. restaurants.